May 1, 2018 / 2:35 PM / a year ago

UPDATE 1-Freddie Mac income rises on derivative gains, apartments growth

(Adds details, background)

May 1 (Reuters) - Freddie Mac, the No. 2 U.S. mortgage finance company, said net income in the first quarter grew to $2.93 billion from $2.21 billion a year ago due to gains on its derivatives and growth in its apartments business.

The mortgage agency rebounded from results in the fourth quarter, when it recorded a $5.4 billion writedown of its net deferred tax assets stemming from the massive U.S. tax overhaul.

The McLean, Virginia-based company said it will not make a dividend payment to the U.S. Treasury in an effort to build a $3 billion capital cushion as a result of the most dramatic rewrite of the U.S. tax code in 30 years.

In 2008, the government took control of Freddie and Fannie Mae in a $187 billion bailout during the global credit crisis after they were exposed to soured subprime mortgages. The two agencies have handed over their profits to the Treasury under the terms of the conservatorship.

Freddie and Fannie make money by charging fees to guarantee home loans made by banks and other lenders. They also earn income from investing in mortgage and related securities.

In the first three months of 2018, domestic home sales have remained resilient as tight supply across the United States offset an increase in home borrowing costs.

Existing home sales increased for a second month in March.

While its business financing single-family homes edged up a modest 3 percent in the first quarter, Freddie’s portfolio to guarantee apartment or multifamily loans grew 30 percent from a year ago to $213 billion.

It said it helped fund about 152,000 apartment or multifamily dwellings in the first quarter after providing financing to 820,000 units in 2017.

Last week, interest rates on 30-year, fixed-rate mortgages averaged 4.58 percent, the highest since August 2013, according to Freddie Mac.

In the rising rate environment, Freddie booked $1.83 billion in gains on its derivatives, compared with a $302 million loss in the first quarter of 2017. (Reporting by Richard Leong Editing by Jeffrey Benkoe)

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